Air India goes aggressive on cargo operations

Lalatendu Mishra,
Mumbai

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Updated: May 01, 2007 21:55 IST

With all foreign carriers aggressively expanding cargo capacities in India to take advantage of an exports boom in the country, national carrier Air India has decided to launch its all freighter operations from June this year.

To begin with, its first all freighter aircraft, converted from A 310 passenger aircraft would be deployed in the Kerala-Gulf sector. HT first reported about it on April 25. Air India on Tuesday announced the official arrival of this freighter.

Air India, which in the early 90s had an air cargo market share of 30 per cent, is planning to regain its market share from this operation. In the next three years it is planning to a have a fleet of 10 to 12 cargo aircraft having services to the Gulf, the US and far east markets. Apart from own converted aircraft, additional capacities would be leased in the future, Air India officials said.

"India has been experiencing an upsurge in the import-export market. This is a step taken to cater to the growing import-export demand. There is lot of demand for exports of leather, flowers, vegetables and fruits and high value imports," said Air India director finance and spokesman S Venkat.

A full-fledged cargo operation can also improve the yields without the hassles of passenger operations. "Currently cargo yield is 40 per cent of the passenger yield and passenger operations are always rewarding than cargo service. But the yields can match provided the load factor is high in an all cargo set up," said Venkat.

The breakeven mark in passenger service is 65 per cent load factor while it is higher at 75 per cent load factor in case of cargo. In cargo operations airlines get better revenue from transportation of high value technology equipment rather than perishables.

One of the major reasons behind this move to phase out older aircraft from passenger operations is due to frequent technical snags for which the airline has been receiving flanks from passengers. Once the newly ordered Boeing aircraft join into passenger operations, Air India will convert few of its Boeing 747-300 combi aircraft into freighters to satisfy the European market.

Another advantage of cargo operations is that it requires less crew and maintenance issues are comparatively less.

Currently, Air India generates Rs 400 crore revenue from cargo operations, carried out by its passenger aircraft. "We will see an improvement of 10 to 12 per cent in revenue growth from these all cargo operation," said Venkat

Currently Air India’s market share is 8 per cent of imported cargo while that of 11 per cent of exported cargo.

Air India’s foray is in line with government’s liberalisation policy in the cargo sector to address the problem of demand supply gap. Anticipating a boom in the organised retail sector the government is also looking at raising the limit for foreign direct investment (FDI) in air cargo sector from 49 to 74 per cent.

Airbus in a recent market outlook for the next 20 years, said that India’s dedicated freighters will go up from the current eight to around 165 aircraft by 2025.